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Gold Advances for a Third Day as Markets Ponder Powell’s Stance

Published 02/08/2023, 08:08 AM
Updated 07/09/2023, 06:32 AM

Gold prices are up for a third day in a row on Wednesday amid a weaker U.S. dollar following words from Federal Reserve Chairman Jerome Powell on Tuesday. The yellow metal is trimming post-nonfarm payrolls data losses. At the time of writing, spot gold price XAU/USD is trading at the $1,880 area, recording a 0.46% gain on the day.

In an interview, Powell said that the central bank needs to increase rates further as it has not yet reached a sufficiently restrictive stance. Powell noted that the disinflationary process “has a long way to go.” Still, the mere mention of the word “disinflation” acted as a catalyst to deem the central banker not-so-hawkish, weighing on the U.S. yields and the dollar and lifting equity prices.

He also stated that future hikes would remain data dependent. By the end of the interview, however, the greenback had stabilized, and the U.S. yields were from flat to higher. In terms of rates, the WIRP tool suggests a 25 bp hike in March by the Fed is fully priced in with very low odds of a larger 50 bp increase.

The metal price action will continue to follow yields and dollar dynamics, with several FOMC members speaking on Wednesday.

XAUUSD Daily Chart

From a technical perspective, the XAU/USD short-term bias remains tilted to the downside following last week’s slump, although the RSI has turned higher and approached its midline, while the MACD prints lower red bars.

A break above the $1,895-$1,900 zone would improve the technical outlook, targeting a now flat 20-day SMA at the $1,915 zone. On the flip side, the immediate support area is seen at weekly lows at $1,860, followed by $1,840.

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